Sustainability in the Time of Uncertainty

59 Pages Posted: 11 May 2020 Last revised: 20 May 2020

See all articles by Ola Mahmoud

Ola Mahmoud

University of Basel; University of California, Berkeley

Julia Meyer

University of Zurich - Department of Banking and Finance, CSP

Date Written: May 1, 2020


We present evidence that sustainability ratings reflect stock-inherent uncertainty. Examining the shock of the COVID-19 pandemic, we show that sustainable stocks have proven most resilient during the crash and argue that the magnitude of this effect cannot be explained by firm fundamentals. Based on an econometric decomposition of sustainability scores into three explanatory components capturing uncertainty, sentiment, and idiosyncratic sustainability, this resilience is principally driven through an uncertainty channel. Experimental evidence on investor preferences for sustainability supports the premise that sustainability is valued during the crash. The results point towards the importance of considering sustainability criteria to mitigate uncertainty.

Keywords: sustainable equity, market crash, uncertainty, ambiguity, investor sentiment, ESG factor

JEL Classification: G01, G14, G41, C33, D81, D91

Suggested Citation

Mahmoud, Ola and Meyer, Julia, Sustainability in the Time of Uncertainty (May 1, 2020). Available at SSRN: or

Ola Mahmoud (Contact Author)

University of Basel ( email )

Petersplatz 1
Basel, CH-4003

University of California, Berkeley ( email )

Center for Risk Management Research
Evans Hall
Berkeley, CA 94720
United States

Julia Meyer

University of Zurich - Department of Banking and Finance, CSP ( email )

Plattenstrasse 30/32
Zürich, 8032

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